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Three Biggest Homebuying Trends for 2016

Three Biggest Homebuying Trends for 2016

According to Freddie Mac’s chief economist, mortgage interest rates should remain at historically low levels in 2016 regardless of the Federal Reserve’s decision to raise the federal funds rate (for the first time since 2006) late last year. What does that mean for you? Whether you’re ready to buy or sell a home, now could be the time to act. But before you do, consider how the three biggest homebuying trends may affect you.

  1. Housing inventory is likely to increase.

The Home Price Index, produced by CoreLogic, has increased 6 percent in the last year. The real estate experts predict home values will continue to go up at least 5 percent more by the end of 2016. This continued increase may encourage some homeowners who have been on the fence to decide it’s time to sell, expanding the inventory of available homes on the market.

However, that inventory may still not be enough to satisfy the number of Americans looking to buy—especially in areas with affordable property prices.  If you’re planning to sell and have priced your home properly, it’s likely to go quickly. And if you’re planning to buy, you can expect plenty of competition.

  1. Buying will remain more affordable than renting—in most of the country.

According to real estate experts at Trulia, buying was a better deal than renting in 98 of the 100 largest markets in the nation in 2015. Although interest rates are likely to rise slightly in 2016, they expect buying will continue to edge out renting. In fact, in many metro areas, interest rates will have to reach double digits before it will make more sense to rent than to buy a home. The caveat is California. If mortgage rates go up by 4.5 percent there, renting could become a better deal than buying in the Bay Area, Ventura County and San Diego.

  1. Millennials buyers may become more plentiful.

For years now, real estate experts have waited with bated breath for the millennial generation to jump into the homebuying market with both feet. Unfortunately, it hasn’t happened—due at least in part to gargantuan student loan debt and continued unemployment. While it’s possible many younger adults will continue to put their purchasing plans on hold, some experts predict they’ll still account for at least a third of residential real estate transactions this year.

Contact us today for additional insight into these and other trends expected in your area this year. We’d love to share our expertise with you, whether you’re planning to buy or sell in 2016.

When Buying a New Home, It Pays to Play by The Rules

When Buying a New Home, It Pays to Play by The Rules

Life is full of guidelines, although some activities require more regulations than others do. For example, the official rulebook of the National Football League is over 100 pages long. The certified version of the Affordable Care Act has more than 900 pages. In contrast, buying real estate appears pretty simple; just avoid breaking these four essential home purchase rules.

1. Use a real estate agent.

Your residence may be the single biggest purchase you’ll ever make; don’t you want an experienced professional by your side? Sure, you can learn a lot about the process online, but according to the National Association of Realtors, 88 percent of homebuyers still choose to use a real estate agent or broker. There are many reasons to do so. For one, their services are generally free because the seller’s agent splits his or her commission with them. Also, a buyer’s agent can access historical price data for the area; without one, you’re definitely in danger of paying too much for the property.

 2. Get a mortgage pre-approval before you make an offer. 

Securing a mortgage pre-approval requires having a lender vet your credit and financials. If everything checks out, you receive a document from that states you currently qualify for a particular loan amount under the lender’s guidelines. Most pre-approvals are good for 60 to 90 days, and many real estate agents advise their clients to reject offers without one.

3. Make an earnest deposit with your offer.

It’s traditional for buyers to make a deposit—known as earnest money—when they put an offer on a home. While the amount may vary due to location or market conditions, 1 to 2 percent of the purchase price is fairly typical. Your buyer’s agent can help you determine the right amount for your particular situation. In combination with a pre-approval letter, an earnest deposit will show the seller that you’re serious about buying the home. This can be invaluable if you find yourself competing with other interested parties. Of course, you should include contingencies in your offer that will enable you to retrieve your deposit should the deal fail to go through.

4. Make your offer personal.

Yes, buyers want to sell their homes for the asking price—or even more. However, many also want to know that their property is going to a good family. They lived in—and loved—the home for years, and they naturally have a personal attachment to it. You can use this to your advantage in a competitive real estate environment. In addition to a pre-approval document and earnest money deposit, submit a handwritten letter with your offer. Talk about your family, how much they love the property, and your dreams of living there. If you can evoke the seller’s emotions and forge a personal bond, you will enhance the chances they will select your offer.

Are you ready to buy your next home? Contact your mortgage professional and real estate agent today to initiate the pre-approval process and begin the search for your perfect property.

3 Things to Consider Before You Pay of Your Mortgage

3 Things to Consider Before You Pay of Your Mortgage

For many people, a home is their biggest investment—and the mortgage that accompanies it their largest financial commitment. However, it may not be one they should eliminate—at least according to the experts. When the gurus wax poetic about eliminating debts, they are generally speaking of high-interest obligations such as credit cards with APRs around 13 percent, not 30-year mortgages with interest closer to 4 percent.

That said, in an uncertain economy, mortgage debt becomes more of a worry—especially if you’re nearing retirement or work in a volatile industry. Monthly payments of any size are always harder to make after you stop receiving paychecks. While the current residential mortgage delinquency rate of 5.35 is much lower than the peak of 11.27 in first quarter 2010, it’s still significantly higher than the 1.95 delinquency rate in fourth quarter 2006 before the last recession began.

So what’s the smartest move? Should you use every spare penny you can rustle up to pay down your mortgage balance or sock it away in savings and investments for retirement? It really depends on your personal financial situation.

Credit card debt is a burden

If your balances have crept up, and you’re making hefty payments on high-interest debt every month, it makes better financial sense to pay off your credit cards before you start chipping away at a bigger piece of your mortgage each month. Interest on credit card debt isn’t tax deductible; your mortgage interest is.

You have an IRA or 401(k)

Depending on the type of tax-favored retirement account you have, your contributions will result in a deduction on your current taxes or tax-free accumulated gains. Either way, it makes financial sense to put extra money towards your maximum retirement contribution before you begin paying down your mortgage at a faster pace.

You’re ready to retire

While it would be nice to be free of your mortgage payment before you collect your final paycheck, putting all your spare dollars into early payoff may leave you house-rich and cash-poor. You don’t want to find yourself in a situation where you’ve depleted your savings to the point where it’s difficult to cover necessities like food and fuel.

Once you’ve reduced your credit card debt and have maximized your tax-favored retirement account, there’s one more alternative use of your money to consider before prepaying your mortgage: market investments. Historically, stock-owning mutual funds with reinvested dividends have returned much higher earnings than the 4 percent you may be paying on your mortgage. Sock extra cash away there and you very well may come out ahead.

If you’d like to discuss the merits of paying off your mortgage further, consult your financial professional. And if your current home loan has an interest rate higher than 4 percent, contact your mortgage advisor to discuss your current refinancing options. A lower rate and a shorter term could help you become mortgage-free faster.

Protecting Homeowners from Risky Mortgages

If you’re ready to purchase a new home — there are rules recently put in place to help protect you from entering into a risky mortgage. While these new rules may seem like obstacles placed in your way to prevent you from your homeowner dreams — and the lending process has certainly become more restrictive — these newer rules are there to help you purchase a home you can both enjoy and keep. If you’re not sure you’re ready to buy, consider these guidelines:

 

Ability to Repay

Adjustable-rate mortgages with super-low teaser rates were among the worst contributors to the foreclosure crisis, as were no doc loans that allowed borrowers to purchase homes without proving their income or savings. These products are a thing of the past—and likely to stay that way. Under the new “Ability to Repay” rule, mortgage lenders must thoroughly evaluate every consumer’s financial fitness regardless of the type of loan for which they are applying.

You can expect them to scrutinize your income and assets, your employment, your debts and your credit history as well as expected costs for homeowner’s insurance, mortgage insurance and property taxes when determining your ability to meet the monthly payment obligation on a loan. In most cases, your total monthly debt payments cannot exceed 43 percent of your monthly gross income or you’ll be denied financing approval.

Documentation of all details is required. This means more paperwork and longer processing times, especially if you’re self-employed as a freelancer or own your own business. You’re now required to produce two years of personal and business tax returns as well as a profit-and-loss statement and balance sheet to prove your repayment ability.

 

Qualified Mortgage

In the opinion of the Consumer Financial Protection Bureau, safer mortgages are ultimately more affordable. The “Qualified Mortgage” rule eliminates features they have deemed unsafe, such as terms longer than 30 years, interest-only payments and negatively amortizing loans—those in which minimum payments don’t cover the interest on the mortgage, causing the balance to continue to grow.

Additionally, the rule prohibits lenders from charging upfront fees of more than 3 percent of the mortgage balance. These fees include title insurance, origination fees and points. Points are pre-paid interest, each equal to 1 percent of the loan amount, used to lower the interest rate on the mortgage.

 

Unqualified Loans

Lenders can still choose to offer mortgage products that do not follow these rules. However, because they will be considered unqualified loans, they cannot be sold to Fannie Mae or Freddie Mac, the two government-sponsored enterprises that buy about 70 percent of all mortgages from lenders on the secondary market. This means it is likely that few lenders will bother. If they do, consumers can expect to pay much higher fees and interest rates for the products offered.

If you’re ready buy and have questions,  contact your real estate professional for further insight.

Protecting Homeowners from Risky Mortgages

Protecting Homeowners from Risky Mortgages

If you’re ready to purchase a new home — there are rules recently put in place to help protect you from entering into a risky mortgage. While these new rules may seem like obstacles placed in your way to prevent you from your homeowner dreams — and the lending process has certainly become more restrictive — these newer rules are there to help you purchase a home you can both enjoy and keep. If you’re not sure you’re ready to buy, consider these guidelines:

 

Ability to Repay

Adjustable-rate mortgages with super-low teaser rates were among the worst contributors to the foreclosure crisis, as were no doc loans that allowed borrowers to purchase homes without proving their income or savings. These products are a thing of the past—and likely to stay that way. Under the new “Ability to Repay” rule, mortgage lenders must thoroughly evaluate every consumer’s financial fitness regardless of the type of loan for which they are applying.

You can expect them to scrutinize your income and assets, your employment, your debts and your credit history as well as expected costs for homeowner’s insurance, mortgage insurance and property taxes when determining your ability to meet the monthly payment obligation on a loan. In most cases, your total monthly debt payments cannot exceed 43 percent of your monthly gross income or you’ll be denied financing approval.

Documentation of all details is required. This means more paperwork and longer processing times, especially if you’re self-employed as a freelancer or own your own business. You’re now required to produce two years of personal and business tax returns as well as a profit-and-loss statement and balance sheet to prove your repayment ability.

 

Qualified Mortgage

In the opinion of the Consumer Financial Protection Bureau, safer mortgages are ultimately more affordable. The “Qualified Mortgage” rule eliminates features they have deemed unsafe, such as terms longer than 30 years, interest-only payments and negatively amortizing loans—those in which minimum payments don’t cover the interest on the mortgage, causing the balance to continue to grow.

Additionally, the rule prohibits lenders from charging upfront fees of more than 3 percent of the mortgage balance. These fees include title insurance, origination fees and points. Points are pre-paid interest, each equal to 1 percent of the loan amount, used to lower the interest rate on the mortgage.

 

Unqualified Loans

Lenders can still choose to offer mortgage products that do not follow these rules. However, because they will be considered unqualified loans, they cannot be sold to Fannie Mae or Freddie Mac, the two government-sponsored enterprises that buy about 70 percent of all mortgages from lenders on the secondary market. This means it is likely that few lenders will bother. If they do, consumers can expect to pay much higher fees and interest rates for the products offered.

If you’re ready buy and have questions,  contact your real estate professional for further insight.

3 Tips for Selling Your Home in 2016

3 Tips for Selling Your Home in 2016

Despite the advantages of a seller’s market, it never hurts to take proactive measures to ensure your home sells for the best price and as quickly as possible. Consider the following suggestions to position your property favorably in 2016.

  1. Exceed buyer’s expectations. Many people who’ve been around the real estate block expect pre-owned homes to come with problems. Get your property into tip-top shape before you put it on the market and you’ll eliminate most buyers’ potential objections. Doing so will require fixing anything that does not work, touching up paint (or repainting altogether) and thoroughly cleaning or replacing any carpets. You may also need to update your landscaping and repaint the exterior of your home. It sounds like a lot of work—and it some cases it may be—but selling your property at asking price is worth it.
  1. Don’t price your home without a comparative market analysis. You may think your property is worth $500,000, but the local real estate market needs to agree with that price if you want to have any chance of making a successful sale. Ask your real estate professional to provide you with a comparative market analysis (also known as a CMA) showing how your property stacks up against similar recently sold homes. This analysis will also help you understand what it will take to sell in your neighborhood. For example, if you live in an area with a number of foreclosures, you might need to lower your asking price.
  1. Don’t wait for values to go higher before you put your home on the market. According to the National Association of Realtors® (NAR), new home construction is lagging behind job growth in nearly two-thirds of metro areas in the U.S. Additionally, there are more buyers considering the housing market, as a result of continued improvements in the job sector and broader economy.However, that doesn’t mean you should wait. While it is true prices could continue to increase, waiting to sell carries significant risks that may not be worth your while for the potential of a better price. If you’re ready to sell, then jumping in with a competitive price can also lead to more offers and a potentially higher sold price for your home.

If you’d like to discuss the current real estate market in your area or evaluate options for selling your home in 2016, your real estate professional can provide valuable insight and advice.

Seven Tips On How To Appeal Property Taxes

Seven Tips On How To Appeal Property Taxes

In most cases, the home is the largest asset a person has. Whether the real estate market is good or bad, it’s important to remain apprised about your asset and surrounding properties that can impact the value of your asset.

The property tax rate appeal process is one way to stay informed. It should be done anytime a reassessment happens and you feel there’s a discrepancy in tax figures, not just when the real estate market is down. A successful appeal can save you hundreds to thousands of dollars if the local government doesn’t simultaneously raise taxation rates and counteract your tax savings from winning the appeal .

However, it’s up to you to do the research during every assessment period. Basically, the appeal process involves searching for any discrepancy in the how the taxation board comes up with the amount you’re to pay in taxes and noting nearby comparable properties paying less than you in taxes. Most appeal experts recommend having at least five credible comparable property examples in the appeal.

The biggest question is whether or not you should undertake the appeal process on your own? You most certainly can, and some appeal boards might even be more favorable to appeals filed by an individual. However, you do have the option for help if you need it. You can usually always find a local lawyer, real estate agent, or financial consultant with expertise in appealing, but these entities often charge a fee of up to 50% of the first annual reduction.

The first step in appealing is obtaining the necessary forms off the internet or at your local tax assessor office. The tax assessor office is also where you’ll find the comparable property values in your area.

Here are some key tips to help you during the process:

1. Recalculating – property taxes are derived from a percentage of the property value multiplied by whatever the local tax rate is. Recalculate your tax bill, making sure that the property description is correct. It’s often the basics that are wrong. So, carefully check the accuracy of key features like the number of baths and rooms.

2. Renovation – a renovation might increase the home’s market value and tax valuation. However, certain renovations and additions that aren’t habitable all year long might provide a loophole since they aren’t considered a full-time new space.

3. Circumstances – you might have an argument for a lower home valuation if you can prove certain circumstances. For example, a nearby road project causing a nuisance, a roof leak that you’re unable to afford repairing, or damaged windows in need of repair.

4. Deadlines – be aware that there’s usually an appeal deadline. It’s usually posted in the real estate section of local newspapers.

5. Preparation – if you’re presenting the appeal yourself, then you might consider looking at previous newspaper reports or documents discussing the appeal process. The tax assessor’s office may be able to offer some helpful advise, but do organize your questions before arriving, as they are often very busy during the tax and appeal season. Once you’ve compiled all the information, it may be helpful to rehearse your final presentation several times and readjust for any flaws or inconsistencies.

6. Help – if you need it, get it. Remember to check the fees and credibility of the firm before signing on the dotted line.

7. Quitting – hang in there, it might be a tedious process, but remember the payout that will come from eliminating any existing inequality of taxation.

Cold Weather Coming: Is Your House Energy Efficient?

Cold Weather Coming: Is Your House Energy Efficient?
With Autumn in full drive, we’re donning warmer clothing and thinking about the holidays. We might also be thinking about higher energy bills. While The U. S. Department of Energy advises homeowners to regularly conduct home energy audits to assess how much energy your home uses, now it the time to decide on the steps you can take to make it more efficient before winter arrives.  An energy audit will help you determine where your house is losing energy and evaluate the efficiency of your home’s heating and cooling systems. Problems that are uncovered during an audit, when corrected, can save you significant amounts of money over time.

You can easily perform a home energy audit by walking through your home and conducting a careful inspection. As you go though each area, keep a checklist of the problems you found. This list will help you prioritize what upgrades you need to make.The list below contains the Department of Energy’s recommendations for conducting your audit:

Air leaks – Make a list of the places there are obvious drafts. Check for gaps along the baseboard or edge of the flooring and at junctures of the walls and ceiling. Also look for gaps around pipes and wires, electrical outlets, foundation seals, and mail slots. Check to see if the caulking and weather stripping are applied properly, leaving no gaps or cracks, and are in good condition.

Inspect windows and doors for air leaks. See if you can rattle them, since movement means possible air leaks. Check the storm windows for proper fit.

Insulation – Check the attic hatch to see if it is at least as heavily insulated as the attic, is weather stripped, and closes tightly. In the attic, determine whether openings for items such as pipes, ductwork, and chimneys are sealed. Check to see if there is a vapor barrier under the attic insulation. The vapor barrier might be tarpaper, or a plastic sheet. If there does not appear to be a vapor barrier, you might consider painting the interior ceilings with vapor barrier paint to reduce the amount of water vapor that can pass through the ceiling. Make sure that the attic vents are not blocked by insulation. You also should seal any electrical boxes in the ceiling with flexible caulk (from the living room side or attic side) and cover the entire attic floor with at least the current recommended amount of insulation.

Check the walls’ insulation by selecting an exterior wall and turning off the circuit breaker or unscrewing the fuse for any outlets in the wall. Once you have determined that your outlets are not getting any electricity, remove the cover plate from one of the outlets and gently probe into the wall with a thin, long stick or screwdriver. If you encounter a slight resistance, you have some insulation there.

If your basement is unheated, determine whether there is insulation under the living area flooring. In most areas of the country, an R-value of 25 is the recommended minimum level of insulation. An R-value indicates insulation’s resistance to heat flow. The higher the R-value, the more effective the insulation.

The insulation at the top of the foundation wall and first floor perimeter should have an R-value of 19 or greater. If the basement is heated, the foundation walls should be insulated to at least R-19. Your water heater, hot water pipes, and furnace ducts should all be insulated.

Heating/Cooling Equipment – If you have a forced-air furnace, check your filters regularly and replace as needed. Generally, you should change them about once every month or two, especially during periods of high usage. Have a professional check and clean your equipment once a year.

Check your ductwork for dirt streaks, especially near seams. These indicate air leaks, and they should be sealed with duct mastic, a non-toxic adhesive-sealant. Insulate any ducts or pipes that travel through unheated spaces. An insulation R-Value of 6 is the recommended minimum.

Lighting – Examine the wattage size of the light bulbs in your house. You may have 100-watt (or larger) bulbs where 60 or 75 watts would do. You should also consider compact fluorescent lamps for areas where lights are on for hours at a time.

Five Financial Benefits of Homeownership

Five Financial Benefits of Homeownership

French philosopher Gaston Bachelard once wrote, “If I were asked to name the chief benefit of the house, I should say: the house shelters day-dreaming, the house protects the dreamer, the house allows one to dream in peace.” While a sturdy roof certainly keeps out the elements and four walls ensure the privacy of occupants, owning a home imparts significant financial benefits as well.

  1. A home allows you to build wealth over time. When you own a home, your wealth—in this case, equity in your home—increases every month. Each time you make a mortgage payment a portion of the installment reduces the amount you owe, growing your equity (the difference between what you can sell it for and what you owe on it). Your equity will also increase as the value of your property increases.
  1. A home comes with numerous tax deductions. Provided you itemize deductions on your federal income taxes, you stand to benefit from huge deductions when you buy a home. For example, you can deduct origination fees from your income the year you buy your home. You can also deduct the interest you paid on your mortgage and the cost of your property taxes—the first year and every other year you own your home.
  1. Open a home equity line and deduct even more. If at some point you decide to tap into the equity you’ve built in your home to pay off high-interest debts, go to school or make property improvements, you can deduct the interest you pay on that home equity loan or line of credit when you figure your federal income tax as well.
  1. In many cases, you can avoid capital gains tax when you sell. Provided you live in the property as a primary residence for more than two years, you can keep up to $250,000 in profits (or $500,000 if you’re married) from the sale without paying capital gains taxes. If your home has appreciated substantially since the time of purchase, these tax savings can be significant.
  1. Owning a home is cheaper than renting—especially in the long term. According to a recent report on ABC News, rents are increasing across the country as apartment vacancy rates continue to fall. In many locations, rent is rising faster than wages or inflation—averaging 3.2 percent more in 2013 than in 2012. Experts expect rents to continue to only increase.

Buy a home and you’ll avoid rising rental costs as well as reap significant tax benefits, all while increasing your wealth. For more insight into the housing market in your city, contact a local real estate professional.

Questions to Ask at an Open House

According to the National Association of Realtors (NAR), the average homebuyer spends 10 weeks searching for the right property. During that period, 90 percent look at available homes online—yet only 45 percent attend an open house. Those who don’t are missing out on a convenient opportunity to ask the listing agent or homeowners a few probing questions that could help tremendously in the purchase decision.

Before you attend your next open house—or private showing with a real estate agent, for that matter—consider the following enquiries virtually guaranteed to reveal much more than the age of the property and homeowners association fees.

Has the property had any offers? If you’ve found a home you’re really interested in, the answer to this question will indicate how much competition you can expect should you make an offer.

Have the sellers rejected any offers? If the current homeowners have rejected an offer, you’ll want to know why. That type of information will help you craft a bid they’re more likely to approve and, if you find yourself competing for the property, may even give you an advantage.

How long has the property been on the market? In general, the longer it’s taking to sell a home, the more likely the owners will be to accept an offer below asking price—especially if homebuyers have shown little interest so far. Ask about the timing of any previous price reductions as well.

Has the property previously been in escrow? If an offer was accepted but the sale fell through, it could indicate potential issues. Request copies of any inspection reports before you proceed with an offer of your own. Lenders will not finance mortgages for homes with serious or potentially costly defects.

Is the property subject to any liens? Unpaid homeowner’s association dues, property taxes and federal taxes can all result in liens on a home. The sellers would need to settle these before closing, which could result in a significant delay.

Why did the homeowners decide to sell? While more than 30 states have laws describing what a seller must disclose to a potential homebuyer—including things like structural problems, toxic mold and lead paint—not all require them to reveal issues with their neighbors or the neighborhood in general. Still, the agent may let something useful slip so it doesn’t hurt to ask.

Has this property appraised at the asking price? The real estate crash caused home values to decline across the nation, leaving numerous owners underwater on their mortgages. While values are on their way up once again, appraisal at the listing price is never guaranteed—and if it comes in low, it could derail your financing.

Many homeowners looking to sell put their properties on the market during the warmer months of spring and summer. If you’ve been thinking about moving up or investing in rental property, now is an excellent time to contact a real estate professional and begin the search for your next home purchase.